December 3 - 9, 2023: Issue 608


New state government rules to increase Density in r2 + r3 zones go on exhibition for feedback this week

2014 View into Warriewood valley from Powderworks road, Narrabeen
On November 28 2023 the NSW State Government announced changes that will fast-track residential flat buildings of 3-6 storeys, terraces, townhouses, duplexes and smaller 1-2 storey apartment blocks in suburbs where they are not currently allowed.

The changes will apply to R2 and R3 zones. They remove building type permissibility restrictions applied by many local councils.

R2 – low rise residential

The following will be allowable within 800m of any transport node or town centre:

  • Dual Occupancy
  • Two story apartment buildings (or more if current height limits permit)
  • Manor homes / Terraces

R3 (Midrise residential zone)

  • 6 storey Residential Flat Buildings will be permissible within 400m of a transport node or town centre
  • 4 storey RFBs will be permissible between 400m and 800m of a transport node or train station.

The NSW Department of Planning has advised that it will also work with Councils to increase height limits beyond these controls where possible.

On the same date, November 28, the Government's Greater Cities Commission Repeal Bill 2023 passed the lower house of the NSW Parliament. The Bill was declared urgent on the same date and passed the upper house on Thursday November 30.

The bill transfers the strategic planning functions of the commission under part 3 of the Environmental Planning and Assessment Act 1979 to the secretary of the new Department of Planning, Housing and Infrastructure.

Minister for Planning and Public Spaces The Hon Paul Scully stated in the Second Reading Debate:

''The creation of the Department of Planning, Housing and Infrastructure on 1 January 2024 provides an opportunity for the Government to further streamline strategic planning across the State. In addition, the terms of Acting Chief Commissioner Dr Deborah Dearing and Central River City Commissioner Mr Peter Poulet expire on 31 December 2023. The confluence of those dates serves as an obvious inflection point to consider the future of Planning and the ongoing role of the Greater Cities Commission and its functions. 

''Strategic planning should be performed by the agencies that are accountable for and resourced to deliver great outcomes for the people of New South Wales. A core goal of the new department will be to facilitate the delivery of more homes in New South Wales. The alignment of strategic planning functions under one roof is critical to the department achieving that goal.''

The Long title for the Greater Cities Commission Repeal Bill 2023  is: An Act to repeal the Greater Cities Commission Act 2022 and to amend the Environmental Planning and Assessment Act 1979 to abolish the Greater Cities Commission and transfer the strategic planning functions of the Greater Cities Commission to the Secretary of the Department in which that Act is administered; and for related purposes.

This Act commences on 1 January 2024.

On August 18 2023 NSW Premier Chris Minns announced that the Department of Planning and Environment will become two new departments.

From 1 January 2024, the Department of Planning and Environment will be split into two new dedicated entities, the Department of Climate Change, Energy, the Environment and Water, and the Department of Planning, Housing and Infrastructure.

Under the Bill the Planning Secretary must prepare a draft district strategic plan for each district in the Six Cities Region.

A draft district strategic plan must include or identify the following—

(a) the basis for strategic planning in the district, having regard to economic, social and environmental matters,

(b) the planning priorities for the district that are consistent with the objectives, strategies and actions specified in the applicable regional strategic plan,

(c) the actions required for achieving the planning priorities,

(d) the basis on which the Planning Secretary is to monitor and report on the implementation of the actions,

(e) areas of State, regional or district significance, including priority growth areas,

(f) any other matters the Planning Secretary considers relevant to planning for the district.

(4) The planning priorities referred to in subsection (3)(b)—

(a) must include housing targets, if the district is in the Six Cities Region, and

(b) may include housing targets, if the district is outside the Six Cities Region

The Hon Paul Scully stated the terms of Acting Chief Commissioner Dr Deborah Dearing and Central River City Commissioner Mr Peter Poulet cease on December 31. However, they are not the only Commissioners. Under the Bill a person who, immediately before the abolition of the Commission, held office as the Chief Commissioner, a City Commissioner, a Greater Cities Commissioner or other member of the Commission, ceases, on the abolition, to hold the office. The person is not entitled to remuneration or compensation because of the loss of the office. 

The fast-track residential flat buildings reforms create capacity for industry to deliver up to an estimated 112,000 new homes across the Greater Sydney region, Hunter, Central Coast and Illawarra-Shoalhaven, the government announced.

This represents 30 per cent of the number of homes NSW committed to meet under its Housing Accord target of 377,000 new homes by 2029 and approximately 900,000 additional homes by 2041.

In 2021–22, there were 35,800 construction approvals and 24,600 completions in Sydney. Across regional NSW, construction approvals averaged 18,300 dwellings per year over the past 5 years. 

The NSW Planning Department states that 'since 2016, NSW has consistently completed more than 47,000 dwellings each year. This suggests that the NSW housing market is on track to deliver the 45,200 new dwellings per year needed to accommodate projected future demand'. 

NSW had an estimated shortfall of 100,000 dwellings in 2016. In 2021, the NSW Productivity Commission white paper found higher construction rates and declining net immigration during the COVID-19 pandemic had mostly absorbed this shortfall.

However, now that 45,200 new dwellings per year must become 75,400 per year to meet the target the government has committed to for the next 5 years.

Much of what is proposed stems from the NSW Productivity Commission's paper 'Building more homes where people want to live', released in May 2023. The paper is part of a NSW Productivity Commission series that examines how to make housing more affordable and make best use of Sydney’s infrastructure. 

The Commission finds that the greatest effect on house prices could be achieved with a planning process that increases housing density in areas of highest demand, particularly in areas closest to the Sydney CBD. Doing this requires changing current regulations.

Key findings were:

  • To build more housing in Sydney’s existing housing areas, we should:
    • raise average apartment heights in suburbs close to the CBD and job opportunities
    • allow more development near transport hubs to leverage existing infrastructure capacity
    • encourage townhouses and other medium-density development and allow more dual-occupancy uses such as granny flats where increased density is not an option.
  • Sharp increases in NSW rents in recent years show how growing demand can worsen housing affordability when housing supply is unresponsive to changing market conditions.

  • NSW’s low rate of housing construction has contributed to increased prices as limited housing stock makes existing houses more expensive.

    • NSW builds fewer homes compared to other states. Since 1992, NSW has built six dwellings per 1,000 residents on average. Victoria and Queensland have built around eight and nine per 1,000 respectively.
    • Available Australian analysis suggests that a 10 per cent increase in national supply reduces the cost of housing by 25 per cent.
  • Allowing more supply in high-demand locations can improve affordability even for households that cannot currently afford to live there – this process is known as ‘filtering’.

    • In ‘filtering’, new high-quality housing is occupied by high-income households, freeing their former dwellings to be occupied by middle- to high-income households at a reduced cost. In turn, these households leave dwellings that can be occupied by lower income families, reducing burden for social and affordable housing.

Currently, each local council has its own rules for what kind of homes can be built in their area. In many local government areas, these rules do not allow the types of homes the next generation wants; housing close to transport, infrastructure and social amenity.

R2 is a zone for land comprised mainly of low density housing where the planning objective is to protect the locality’s single dwelling character and landscape setting. The zone also allows for a variety of housing types, facilities and services to meet the needs of the community and residents. However, other housing types are required to be at a scale and density that is compatible with the single dwelling character of the locality.

Currently only 2 of the 32 Local Environment Plans in Sydney allow for terraces and low rise apartment blocks in R2 zones.

These restrictions will be removed - as will the environment so many now urban wildlife species exist in - in these 'landscape settings'

The 'fast-tracking' may also remove a community voice on lodged DA's.

Additionally, sixty percent of R3 zones across Sydney, where, the government states, multi dwelling housing is appropriate and should be encouraged, presently prohibit residential flat buildings of any scale.

The Government will introduce a State Environmental Planning Policy (SEPP) to enact these changes while simultaneously encouraging councils to add these types of dwellings to their own planning rules.

If a local government’s planning rules already match this new NSW Government policy, the State Government changes will not apply.

In the Northern Beaches LGA, “Dual occupancy” is currently permitted with development consent in the R2 low density residential zone under the Pittwater and Manly Local Environment Plans (LEPs). Dual occupancy is also permitted with development consent in the R5 Large Lot residential zone under the Pittwater LEP.

“Multi dwelling housing” is currently permitted with development consent in the R2 zone under the Manly LEP only. “Multi dwelling housing” and “dual occupancy” is also permitted with development consent in the R3 Medium Density residential zone under the Manly, Pittwater and Warringah LEPs.

At the November 2023 Council Meeting the Brookvale Structure Plan was endorsed. This allows for additional dwellings and building height increases in some areas of up to 12 storeys and more than 1,350 new dwellings - but over the next 15 years - way too long for the government's plan to fast track density increases.

National Housing Accord targets were set at the National Cabinet with all three levels of Government represented, the state government said. The August 2023 National Cabinet agreed to an ambitious new national target to build 1.2 million new homes over five years, from 1 July 2024. This is an additional 200,000 new homes above the National Housing Accord target agreed by states and territories last year.

''The Commonwealth has committed to $3 billion for performance-based funding, the New Home Bonus, for states and territories that achieve more than their share of the one million well-located home target under the National Housing Accord. This will incentivise states and territories to undertake the reforms necessary to boost housing supply and increase housing affordability, making a positive and practical difference for Australians planning to buy a home.

This target will be supported by the Housing Support Program, a $500 million competitive funding program for local and state governments to kick-start housing supply in well-located areas through targeted activation payments for things like connecting essential services, amenities to support new housing development, or building planning capability.

The updated target will help align supply with expected demand over the next five years, and when linked with Commonwealth infrastructure funding, will produce more neighbourhoods and communities that have the services they need.

National Cabinet also agreed to a National Planning Reform Blueprint with planning, zoning, land release and other measures to improve housing supply and affordability.

The Blueprint includes: updating state, regional, and local strategic plans to reflect housing supply targets; promoting medium and high-density housing in well-located areas close to existing public transport connections, amenities and employment; and streamlining approval pathways.'' Prime Minister Albanese said in a statement.

The NSW plans will go on public exhibition for public feedback from this coming week.

Minister for Planning and Public Spaces Paul Scully said:

“Sydney is one of the least dense cities in the world but fewer than half of councils allow for low and mid-rise residential buildings in areas zoned for such homes.

“We’re confronting a housing crisis so we need to change the way we’re plan for more housing, we can’t keep building out we need to create capacity for more infill, with more diverse types of homes.

“Diversity of housing allows people to stay in their communities and neighbourhoods through different stages of their life, with family and friends able to live nearby. More housing choice means more options for everyone – renters, families, empty nesters.

“Density done well means townhouses, apartments and terraces clustered near shops, high streets and parks.

“We already have great examples of these types of homes. Sydney has grown using these housing types. Look at homes in Wollstonecraft, Waverton, Erskineville, parts of Wollongong or Newcastle. They’re great places to live, we just need more of them.” Mr. Scully said

The NSW Liberals have stated they support measures, including increased density, to deliver the state’s ambitious housing targets – but they must be done right and in partnership with local communities.

''We know that a one-size-fits-all all approach isn’t the right approach. It’s lazy and ill-thought-through policy that shows the Minns Labor Government aren’t interested in putting in the hard work in to deliver on their housing targets.'' the party said in a statement 

''Despite their offer of bipartisanship to help address the housing crisis, the Government has shown they’re more willing to tell local communities to “get out of the way” than in working constructively with the Opposition or with local councils.'' 

The Opposition states the Government has failed to release new housing targets for local councils, allow local councils the opportunity to amend local planning laws to meet and exceed new targets, and address demand-side pressures on housing.

Clearly the Minns Government does have new housing targets for local councils in mind though.

Those targets may be difficult to meet with the continuing and escalating exit of trained people from the building industry, coupled with the loss of materials to infrastructure projects.

Escalating construction costs, including those for materials - which are also becoming scarce, and labour shortages have already claimed well-known building firms across the country. Delivering hundreds of thousands of extra new homes in the coming 5 years will not be easy. 

However, industry lobbyists such as Urban Taskforce and HIA have praised the announcements.

Urban Taskforce CEO, Tom Forrest, 'welcomed the announcement by the NSW Minister for Planning, Paul Scully, that he would introduce a State Environmental Planning Policy to overrule restrictive local Council controls in R2 (low density residential) and R3 (medium density residential) zones'. a statement by the industry organisation representing developers and financiers reads.

''Well-connected suburbs like Gordon, Killara, Ashfield and Berala, all close to heavy rail stations, were subject to local rules that constrained the type of housing that were permissible, as well as limiting height and density. Today’s decision prohibits Councils from using local planning controls to “switch off” apartment development in these areas.''

”The Housing Industry Association (HIA) welcomes the plans announced today by the NSW Government to fast track low and mid-rise housing,” said David Bare, HIA Executive Director NSW.

“This is a great step forward in unlocking the development potential of low-density residential areas in Greater Sydney and across NSW. Allowing dual occupancy developments on land zoned R2 will support the delivery of more housing,” added Mr Bare.

“To achieve this, it is important that the changes to planning controls are consistent across all local government areas. Planning controls that facilitate these developments being undertaken as complying development are also vital. This will ensure the approval process is streamlined minimising delays and reducing costs for the families who can take advantage of the option to knock down their old home on a large block and replace it with two dwellings.

“HIA looks forward to the release of the draft proposals and continuing to work collaboratively with the NSW Government on these and other reforms to increase the supply of new housing of all types across NSW.”

Reducing costs and affordable housing for key workers have become catchcries' in recent years that don't match the statistics. 

According to the latest lending indicators from the Australian Bureau of Statistics (ABS), the average mortgage size for owner-occupier dwellings is $584,907 as of August 2023. Compared to the same month last year, the average mortgage size has decreased by $4,237. 

Looking into the individual states and territories, New South Wales has the highest average mortgage size in the country, averaging at $722,132. Even though it’s the highest in Australia, the number has dropped compared to what it was at the same time last year.  

To meet a standard $500,000 home loan, as of October 2023, for a standard 30-year home loan with a 5.89% interest rate, you need to earn at least $10,614.29 each month — or a $127,371.48 salary — to afford the $2,972 monthly repayment.

And, as of August 2023, the median price of a house in Sydney now sits at $1,333,985, the median price of a unit in Sydney now sits at $817,059.

ABS figures for Building Approvals across Australia in the October 2023 seasonally adjusted estimate shows total dwellings approved rose 7.5%, to 14,223. In New South Wales 1,826 houses were approved and 3,745 units - a rise of 9.6%.

Daniel Rossi, ABS head of construction statistics, said: "Approvals for private sector dwellings excluding houses increased 19.5 per cent, following a 3.4 per cent fall in September."

"Approvals for private sector houses rose 2.2 per cent, following a 4.7 per cent September decrease."

"Despite the monthly increase, total dwellings approved have been low this financial year. In original terms, 55,029 dwellings were approved between July and October in 2023, compared with 65,599 over the same period in 2022."

Council's Brookvale Plan endorsed. Artist impression image. Image: NBC